Warner Bros. and DC Comics have won a favorable ruling in the suit filed by the heirs of "Superman" co-creator Jerome Siegel.
In a decision announced Wednesday, U.S. Judge District Court Judge Stephen G. Larson found that the license fees the studio paid to corporate sibling DC Comics didn't represent "sweetheart" deals as they weren't below fair market value. That means the heirs will be able seek profits only from DC Comics -- which earned $13.6 million from Warner Bros. for the 2006 release of "Superman Returns" -- rather than from Warner Bros. as well.
"DC Comics and Warner Bros. Entertainment are very gratified by the court's thorough and well-reasoned decision in this matter," the companies said in a joint statement. "The decision validates what DC and Warner Bros. have maintained from the beginning, which is that when they do business with each other, they always strive for -- and achieve -- fair market value in their transactions. We are very pleased that the court found there was no merit to plaintiffs' position that the Superman deals were unfair to DC Comics and, by extension, the plaintiffs."
The judge also set a Dec. 1 trial date for determining the allocation of profits to the heirs, who won a ruling last year from Larson that awarded them half the copyright for the "Superman" material.
The heirs had accused Warners of making "sweetheart" deals with DC in 1999 for feature rights and in 2000 for TV rights for "Smallville." The feature rights included $1.5 million upfront, $18.5 million for option extensions over 31 years and 5% of first-dollar worldwide distributor gross or 7.5% of domestic gross -- whichever was larger -- while the TV rights included $45,000 per episode, 3% of first-dollar gross for the first $1.5 million and 5% thereafter.
Larson said in his 30-page ruling that there was "insufficient evidence that the 'Superman' film agreement between DC Comics and Warner Bros., whether judged by its direct economic terms or its indirect ones, was consummated at below its fair market value."
The judge, who conducted a 10-day bench trial, also noted that Warner Bros. chairman Alan Horn had testified that he hopes to make another "Superman" movie but added that the property wasn't under development at the studio, that no script had been written and that the earliest another "Superman" pic could be released would be in 2012.
In making his decision, Larson looked at other licensing deals for properties such as Iron Man, X-Men and Spider-Man. Attorney Marc Toberoff, who represents heirs Joanne Siegel and Laura Siegel Larson, told Daily Variety that the judge had erred in not considering comparable licensing deals for bestselling novels penned by Tom Clancy and Michael Crichton and popular musicals such as "My Fair Lady."
Toberoff, who has specialized in copyright claims, admitted that proving a sweetheart deal within a vertically integrated conglom was a challenge. "This was always going to be tough to prove," he added.
Toberoff also asserted in a written statement that the Siegel heirs and the heirs of co-creator Joe Shuster will own the entire Superman copyright in 2013.
"This trial was only an interim step in the multifaceted accounting case which remains, in that it only concerned the secondary issue of whether DC Comics, or DC Comics and Warner Bros., would have to account to the Siegels," he said. "To put this in further perspective, the entire accounting action pales in comparison to the fact that in 2013, the Siegels, along with the estate of Joe Shuster, will own the entire original copyright to Superman, and neither DC Comics nor Warner Bros. will be able to exploit any new Superman works without a license from the Siegels and Shusters."
Toberoff also asseted that Larson found that Warner Bros. should have paid three to four times the amount actually paid for the Superman film rights and that he had found it "inequitable" that DC transferred the Superman film rights to Warner Bros. without the standard term providing for reversion for lack of ongoing exploitation.
"The Court pointedly ruled that if Warner Bros. does not start production on another Superman film by 2011, the Siegels will be able to sue to recover their damages," Toberoff added. "The Siegels look forward to the remainder of the case, which will determine how much defendants owe them for their exploitations of Superman."